ASX extends 11-year high after early slide

Australian shares closed higher for a sixth straight session on Wednesday, extending its 11-year high after the market rebounded from a loss during morning trade for the second time in as many days.

The S&P/ASX 200 Index added 10.6 points, or 0.2 per cent, to close at 6510.7 while the broader All Ordinaries rose 13.7 points, or 0.2 per cent, to 6598.1.

"The relief rally and rotation in equities sparked by the election outcome was given a further boost from [Tuesday's Reserve Bank of Australia] developments," said Morgan Stanley equity strategist Chris Read.

"[But] trade tension risks remain and are a serious exogenous risk to the growth outlook."

The broker said it was more constructive on the residential market and saw positives for both pricing and volume for the company. It upgraded the stock from "neutral" to "outperform" and increased its price target. Its shares closed 3.8 per cent higher at $4.42.

James Hardie Industries advanced 2.2 per cent to $18.90, Boral added 3.8 per cent to end the session at $5.18, Cleanaway Waste Management rose 1.8 per cent to $2.24, Bingo Industries climbed 7.9 per cent to $1.99 and Adelaide Brighton closed at $4.12 after rising 4.6 per cent.

Chinese President Xi Jinping visited a rare earths facility in Ganzhou, accompanied by his top trade negotiator on Tuesday, sparking speculation he would cut off United States access to the country's rare earth minerals.

Lynas Corp shares rose 7.1 per cent to $2.43, Galaxy Resources added 6.2 per cent to close at $1.79, Orocobre advanced 5.7 per cent to $3.72 and Pilbara Minerals climbed 7.1 per cent to 83.5¢.

Fortescue Metals Group fell 8.1 per cent to $8.27 as it traded ex-dividend. The miner is paying a 60¢-a-share fully franked dividend, with a total of $1.85 billion worth of dividends set to be paid to shareholders.

Stock watch

SEVEN WEST MEDIA

Macquarie retained its 'neutral' rating on Seven West Media but reduced its price target by 11.7 per cent after the media company downgraded its earnings expectations by 11 per cent on the back of weaker advertising market conditions. "The primary driver is weaker ad market conditions, where we see second-half free-to-air TV industry revenue down 5 per cent," said analyst Andrew Levy. "Previous guidance from Seven West Media had implied the second half to be roughly flat." The broker also noted the company had a mixed year from a ratings and revenue share perspective, with My Kitchen Rules, a key platform show for Seven, weaker than expected. Macquarie reduced its share price on Seven West Media from 60¢ to 53¢.

What moved the market

LNG EXPORTS

China was the largest consumer of Australian LNG in April, beating out Japan for just the third time in history. China has been lifting its share of Australian LNG significantly in the past few years, since Australia increased its output in 2015. The result suggests China's share could consistently eclipse Japan soon, but US-China trade negotiations threaten that outlook. "A US-China trade deal though does point to downside risks for Austrialia's LNG exports as China prioritises LNG imports from the US," said CBA mining and commodities analyst Vivek Dhar.

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COPPER

Copper prices could move higher this week after local residents blockaded Minerals and Metals Group's Las Bambas copper mine in Peru. Talks between the miner and the local community regarding compensation for road access to the site broke down and residents have resumed the blockade they lifted early last month. With the mine accounting for 1.6 per cent of global copper supply, any prolonged disruption will put upward pressure on the price, which has been falling over the past month amid escalating trade tensions.

AUSSIE DOLLAR

The Aussie dollar could re-test the multi-year low it hit last week against the greenback, as the market braces for a rate cut next month following Tuesday's RBA May meeting minutes and governor Philip Lowe's speech. "The surprise election result honeymoon for the Aussie has lasted less than 36 hours, with RBA governor Philip Lowe fully responsible for removing the punchbowl from the post-election party," said NAB's head of FX strategy Ray Attrill. "Dr Lowe came as close to pre-announcing a June rate cut as it’s possible for a central banker to get yesterday."

CONSTRUCTION

Australian construction activity in the first quarter fell well below market expectations, marking three consecutive quarters of declining activity. The result is likely to detract from GDP growth in the first quarter. "The weakness in residential activity was not a surprise, but public engineering construction contracted for the third consecutive quarter, which is surprising given the large pipeline of public infrastructure spending," said ANZ senior economist Catherine Birch. "Consequently, construction activity will continue to detract from GDP growth."